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RBC Raise Estimated Probability of Japanese FX Intervention to 30% from 20%

JPY
  • On USD/JPY, RBC overlay the current price action in the pair with the lead-up to the last time Japan intervened to sell USD/JPY in 1997/1998. They write that the pace of JPY depreciation is very similar so it would not be unprecedented for the BoJ/MoF to move on from verbal to physical intervention.
  • As such, they update their model of intervention risk, lifting the estimated probability to 30% from 20% in late March.
  • They note that the MoF/BoJ have not fully utilized their verbal intervention toolkits yet – the next phase would typically involve describing moves as “speculative” and threatening to “take decisive action.” If we get to that point, the hurdle for the next logical step of physical intervention may be lower than generally perceived.
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com
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